Image: Assets: the More the Merrier

An asset is something that adds value to your financial situation. A liability detracts from your financial stability. Your liability may be someone Else’s asset! The loan you pay every month for your house is your banker’s asset. If your home grows in value, it is an asset for you also, provided you continue to protect that investment by maintaining it, making your loan payments, taxes, etc.

Imagine controlling the rights to a house that you have just improved in value by renovating it. Or a horse that just won a big race, or a business that just helped a client double their bottom line. As the asset grows in value, you will need to harvest your “profits” if you are to benefit. Many people saw terrific gains in “paper profits” in the stock market, only to see these gains evaporate. If one of your “businesses” is CEO of your own Trading/Investing portfolio, you need to continue to get better at managing it.

Understanding the fluctuating nature of life is important. Today’s asset may be tomorrow’s liability. Decide, as best you can, when is the best time to capitalize on your asset(s). The experts offer some excellent advice for us: “Cash to Assets to Cash.” Then repeat the process!

Positioning your business to be in front of a significant growth wave is a reliable technique that will propel your business with rocket fuel. Baby boomers, because of their relative size of the population, have become a target for professional marketers. You also would be wise to target them if you are looking for a shortcut to riches.

Apply This Concept
It may be best to determine where your interests lie, then get started in a particular niche, especially one where you already have some expertise. Steadily build a portfolio of investments. Building or creating wealth is best done by focus. Maintaining wealth is more easily accomplished by diversifying. Depending on your age and situation, your plan may include different time horizons. Some sophisticated investors advocate utilizing different methods for short, medium, and long term trading and investing. Cash flow, growth of capital, and tax shelters all have to be considered as part of a total plan. Equally important is having firewalls between your investments; if one goes bad you don't want it to contaminate the rest! Finally, remember that an asset may become a liability. If it does, rid yourself of it immediately, minimizing your losses. Be unemotional about it. Cut your losses and let your profits run. Losers hold and hope, sometimes losing all their profits, and then principal too. Winners don't take losses personally. They understand that it is a risk you take to play the game, and move on to more promising opportunities. Understanding the Opportunity cost or Time Value of Money is an important concept they have learned to embrace. So should you, if you want to be wealthy.
Laws of Wealth
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